I’m a staff writer covering all things Wall Street and Investing. I have a love hate relationship with the world of finance. I am fascinated by the industry’s power and influence around the globe, and the ingenuity of the people it employs. Not so much a fan of the lack of accountability when the system fails—which it often does: I'm always on the hunt for people and companies to profile.

ZeekRewards And Why Ponzi Schemes Will Never Go Away

What is about Ponzi schemes that keep them alive? Much of it has to do with the investors who buy into them.

The SEC is in serious Ponzi-busting mode. In three days the federal regulator announced fraud charges against three Ponzi schemes representing almost $700 million.

The biggest was ZeekRewards, an alleged $600 million internet Ponzi scheme that involved one million customers. The SEC shut down the operation Friday. On Thursday the agency announced fraud charges against a former college football coach for an $80 million Ponzi scheme that included other college coaches and former players among its victims. The day before that the SEC announced fraud charges and an emergency asset freeze against a Denver-based company and two Colorado residents carrying out a $15.7 million Ponzi scheme involving 120 investors nationwide.

“One would think after Bernard Madoff got nailed and went to jail for 150 years these kinds of crimes would slow down. But the bad guys don’t think that way. Instead they might say, ‘Madoff took $65 billion. I don’t need that much. I just need $10 million.’ It’s perverse but it encourages them rather than deterring them,” says Anthony Michael Sabino, a professor at St. John’s University‘s Peter J. Tobin College of Business.

Before market timing and insider trading there was the Ponzi scheme. The scam has been around for at least 90 years when Charles Ponzi duped thousands of investors out of around $20 million in a coupon scheme. Regulators have been going after various Ponzi schemes of all sizes over the years from the massive $65 billion Madoff fraud to affinity Ponzi schemes like the one that targeted a Persian-Jewish community in Los Angeles recently.

“ZeekReward’s alleged scheme is breathtaking in that it involves hundreds of millions of dollars but other than that there’s nothing shocking about yet another Ponzi scheme being exposed,” says securities industry lawyer and Forbes contributor, Bill Singer.

What is about the scheme that keeps them alive? Much of it has to do with the investors who buy into them, experts say. Singer notes that often time the victims of Ponzi schemes are sophisticated and aware of the pitfalls of investor fraud.

“A successful Ponzi scheme requires an investor who thinks he is smarter than he really is and a fraudster who makes him think he’s being given an opportunity no one else is getting. It’s an unholy concoction, and the most fascinating part is that most of the time the people getting ripped off are not ignorant to scams,” he says.

Dan Seiver chief economist at Reilly Financial Advisors and professor at California Polytechnic State University says greed keeps most Ponzis running. “Investor education often falls apart in the face of offers to “make money fast.” If you get people in early and give them a great return then those are the people who will end up helping you run the scam. It spreads to their friends and family.”

Of course technology has helped fraudsters, too. The internet gives scamsters scale allowing them to reach their potential victims outside their proximity. It also allows them the ability to remain anonymous. “Technology allows them to reach out and harm more people across oceans and national borders,” Sabino adds.

Now, for instance, the Allen Stanfords of the world can live in the Caribbean and conduct wire and mail fraud, obstruction and money laundering in a $7 billion Ponzi scheme from the comfort of his home there.

But then there’s another element helping keep Ponzi schemes alive that may surprise you. The regulators. Lawyers who have represented both sides of the Ponzi cases say criminals often use the details in Ponzi cases that regulators make public as a guide of what-not-do.

Singer says the FBI and SEC ought to be more careful in the details that make available. “With all due respect they are not making a dent in the fraud and in fact dangerously misleading the public,” he says.

How? Says Singer, “If you read about all these cases you get the idea that the good guys are catching the bad guys. In reality, for every bad guy that’s arrested there are others who read about the mistakes made and create a different version of that fraud.”

Adds Siever, “The next Ponzi scheme is always going to look a little different from the last. The best advice is the oldest investment advice: If it’s too good to be true then it probably is.”

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Look, the problem with” If It’s looks to good to be true blah blah’……..is that many entrepreneur’s experience it! Was it too good to be true that Bono invested $10,000,000 into Face Book and it turned into two billion??? Do you want to look at all the on line millionaires and internet marketing successes? . Do you want to look at Linked-In and 100′s like them ? Entrepreneur;s are not stopped by what others think? If they were paralysed by “If it looks to good to be true” they would working at the post office……………so one must separate real opportunities from fraudulent opportunities. The problem! They masquerade as one another………You want to play it safe ? Keep your $30,000 a year job as a writer here….

I dont know that Facebook and LinkedIn were ever “too good to be true” investments. There’s a difference between too good to be true and well-researched investment ideas. Also, when has a real opportunity masqueraded as a fraud? Im not following you. And for the record, not sure what youve heard but a writing job is anything but safe, Sammyz.

Neither Facebook, LinkedIn, nor any of the “100′s like them” promised investors guaranteed daily returns based on some arbitrary and proprietary calculation. Rather, those were well-research investments that featured a true possibility of substantial, if not total, loss of principal. That’s much different that Zeek and other financial schemes that not only “guaranteed” the investor’s principal, but promised quick and easy gains. Ignoring your insulting tone and misguided analysis, you simply cannot compare the two.

New and Existing Down line businesses should have to go thru an on going SEC and Authority check to protect investors….All ponzi schemes would be in check and the MLM businesses would not be able to grow unless legal. How many people/investors/affiliates in the Zeeker Reward Program new it was illegal….I bet few. Investors don’t know the “behind the seens” network…they are told what looks to be good. If one investor “knew” it was fraud…would he invest? When money starts growing fast thinking clearly can become sluggish? Proverbs 13:11 Dishonest money dwindles away, but whoever gathers money little by little makes it grow. Proverbs 13:10-12 Holy Bible

I will be critisized not doubt from all the Zeek haters but it is MY OPION and not theirs….right! I am/was a Zeek affiliate and before I joined I did my research and asked the questions that I felt needed to be asked. When I joined I went with my eyes open. In my heart of hearts I believe that Paul Burk and his associates had NO IDEA that this was going to grow as “greased lighting” fast as it did.I believe that when it started out the penny auctions were able to contribute its share as far as the supporting this online profit sharing business. Then all of a sudden whoooosh!! it became a MONSTER and quite frankly got out of their abiltity to control it and it took on a life of its own. Maybe…just maybe…it may have been a stellar idea at some earlier point for one of the “in the know pros” that Paul undoubtedly payed enormous amonts of money for their professional services to say to Paul HEY we had better put on the brakes and stop the new affiliates from fllooding into Zeek for a time and until we get a handle on things here. Hindsight is always 20/20 however and it is easy for us all to say shouda coulda woulda after the fact. I believe that there was NEVER ANY INTENTION at Zeek for anyone to lose cash or for anyone to get swindled in this break down and would have stopped this run away train before all this happened if they had been able to. This is a classic case of a business being brought down by its own sucess…..plain and simple. Paul Burk had access to far more cash then he recieved from ZEEK ….come on give me a break 11 million was a drop in the bucket compared to what the man could have taken he had access to far far more then that amount. So does this sound like someone that was planning all along to scam everyone and run with the money…..I think not. I have lost money like so many other people but have never once felt that this was an intentional move on anybodys part at Zeek. I will miss Zeek as a business and I think that it’s eventual failing was most definitely a product of its own intense rapidly overgrown success. So that’s my story and I’m sticking to it. By the way who in thier right mind would think that all 1 million affiliates would want all their money AT EXACTLY THE SAME TIME!!! I don’t care what business was audited none could with stand that type of juggernaut coming at them…..I am sure this take down of Zeek will be the feather in some politicians cap ….wouldn’t it have been far wiser to tell Zeek ….”get your ducks in a row” or perhaps “fix what needs to be fixed here” ….and not shut down so many peoples lives with the waive of a unbending unforgiving govermental arm ….just sayin!

Not going to attack you, but disagree with you. This was a Ponzi from the start. The penny auction was the hook, but the total business model was based on a previous failed Ponzi ASD Cash Generator. And all the people in ASD Cash Generator said the very same things all the people in Zeek are saying about Zeek now after it too was shut down.

When you look at the major players in Zeek, they were all from ASD Cash Generator. They even bragged that they used ASD Cash Generator as their model, that is if you were listening. Almost all of the top players in this knew this was a Ponzi as they go from Ponzi-to-Ponzi always promoting them to be the real deal and the way to riches.

The problem is they know how to play the game, you don’t. And that’s why all the little people get caught up in these and are the ones who get hurt the most as you can least afford it.

Now do you really believe that for 15 minutes “work” per day posting an ad will generate real income of $40,000 per month? Seriously?

Had the government not acted, this would have collapsed within 60-90 days on its own. You would have tried to login to their website and it would have been gone. No phones, no support, no forum, all gone. At least there is going to be some money to be given back to the true victims of Zeek and you were a victim of great conmen and conwomen in this.

I just hope that the receiver does massive clawbacks against all the major players that knew this was a Ponzi and were ripping off people like you. For you see it is them, Paul, Dawn, Darryl, and others that lied to you from day one, and should be made to pay for it.

The truth was out there, it’s just that Zeeksters refused to believe all of us who were warning all of you this was a Ponzi. But then we were just naysayers, trolls, negative people, jealous, afraid to take risks (any of these sound familiar to you?) that was claimed anytime we were issuing warnings. I know because I was one of them, but guess what? We were all right about what we were saying. I have been researching Ponzi’s for over 9 years now, and I even wrote a book telling you how they do it.

I sincerely hope that you will do real due diligence and not just listen to the “I got paid” and people flashing checks in front of you as the proof the program is legal. Real due diligence takes work, but then when all you have to do is spend 15 minutes a day posting an add to make $40K per month, real due diligence is too much hard work.

The irony in this is this: If the government had not acted and Zeek collapsed on its own, you would be screaming why didn’t the government top them. Remember, if in doubt or not sure, seek out the experts and ask. We are out there and can be found if you look. I wish you all the best.

It’s not a question of “hating” or “growing too fast”. It’s a question of revenue stream. ZeekRewards claimed that daily profits from the Zeeker penny auction were the revenue, which was split 50/50 between the company and the qualified affiliates. For the last month, $130 million was paid to the affiliates, meaining that the revenue stream should have been $260 million. Instead, it was $132 million, 98% of which came from the pockets of the newer affiliates. As a Ponzi Scheme it was destined to fail; in our county, we were starting to run out of new victims. The legacy of Charles Ponzi will always be with us – just with dazzling new bogus revenue streams to con the greedy and the unwary.

Ponzi schemes are terrible, but many people believe that network marketing is the same thing. Actually there is a big difference. I have seen real network marketing companies change people’s lives for good. Just like the one that I am a part of now. I think that the people who were scammed by zeek should look at a real network marketing opportunity like the one I am talking about. Just check out www.newhealthdanger.com and contact me through www.abchealthreport.net to see the power of network marketing when it is done right.